The government’s net tax collections jumped 28% year-on-year in the first four months of FY27, helped by strong direct tax and customs duty collections, even as the fiscal deficit moderated marginally to Rs 4.6 lakh crore. Gross tax revenue rose 11% during April-July 2026, with direct taxes growing more than 20% and customs duty collections surging 38%, aided by higher duties on gold and silver imports.
The fiscal deficit stood at Rs 4.6 lakh crore during the period, or 18.2% of the FY27 budget estimate, compared with Rs 4.7 lakh crore, or 30.8% of the estimate, in the year-ago period. The improvement was driven by a sharp narrowing of the revenue deficit even as capital expenditure (capex) surged 30%.
ICRA estimates the government’s gross tax revenue will need to grow 8.7% in the remaining eight months of FY27 to meet the budgeted target of Rs 44 lakh crore. While this appears achievable given expectations of double-digit nominal GDP growth, some shortfall could emerge in excise duty collections following the cut in petrol and diesel duties, as well as in personal income tax collections.
The shortfall could be partly offset by higher-than-budgeted customs collections, supported by the higher duties on gold and silver imports, ICRA said.
On the receipts side, the government has already mobilised Rs 56,000 crore through disinvestment as of August 31, according to the DIPAM portal, making the FY27 target of ₹80,000 crore in miscellaneous capital receipts achievable.
Government revenue expenditure rose 7.8% in the first four months of FY27 despite a 35% increase in subsidies. Excluding interest payments and subsidies, revenue expenditure grew 11.4%. Capex grew much faster at 30%, driven by a more than 50% increase in June-July.
